China's Growth to 2030: The Roles of Demographic Change and Financial Reform

This paper is worth a quick glance. What is interesting is the acknowledgement that China's population is not growing so quickly or will even start to contract. I am not convinced that this is true.

China's Growth to 2030: The Roles of Demographic Change and Financial Reform

Rod Tyers
Australian National University (ANU) - School of Economics

Jane Golley
Australian National University (ANU) - Faculty of Economics & Commerce

Review of Development Economics, Vol. 14, Issue 3, pp. 592-610, August 2010

Abstract:
China's economic growth has, hitherto, depended on its relative abundance of production labor and its increasingly secure investment environment. Within the next decade, however, China's labor force will begin to contract. This will set its economy apart from other developing Asian countries where relative labor abundance will increase, as will relative capital returns. Unless there is a substantial change in population policy, the retention of China's large share of global FDI will require further improvements in its investment environment. These linkages are explored using a global economic model that incorporates full demographic behavior. Financial reform is measured by the effect of declining intermediation costs on the wedge between home and foreign borrowing rates, or the “investment premium.” The influence of this wedge on China's projected economic growth performance is investigated under alternative assumptions about fertility decline and labor force growth. China's share of global investment is found to depend sensitively on both its demography and its interest premium, though the results suggest that a feasible continuation of financial reforms will be sufficient to compensate for a slowdown and decline in its labor force.

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Facing the Challenge of the Rising Chinese Economy: ASEAN's Responses

I do a lot of work on Chinese trade and it's relationship with ASEAN. Is China a help or hindrance?

This recent RDE paper makes some progress on this issue.

Facing the Challenge of the Rising Chinese Economy: ASEAN's Responses

Yunhua Liu
Nanyang Technological University (NTU) - School of Humanities & Social Sciences

Beoy Kui Ng
Nanyang Technological University (NTU)

Review of Development Economics, Vol. 14, No. 3, pp. 666-682, August 2010

Abstract:
The emergence of China as one of the largest trading nations in the world provides challenges and opportunities to its neighboring ASEAN countries. In the face of the rise of the Chinese economy, there were concerns that ASEAN economies may be adversely affected with the loss of competitiveness in the international market. One of the concerns is that the world export markets of labor-intensive goods will be threatened if China turns into the world low-cost manufacturing factory. Meanwhile, trade between China and ASEAN countries increased dramatically during the past decades. Not surprisingly, China's accession to the WTO and the future establishment of a free trade area (FTA) between ASEAN and China will further change the trade relations in the region. The paper first analyzes the past trade patterns between China and ASEAN countries and assesses the impact of the rising Chinese economy on ASEAN countries, in particular, the impacts on specific industries in each individual ASEAN country. Second, the paper examines the ever-increasing role of foreign direct investment between the two regions and, finally, it analyzes and assess the policy responses of the ASEAN countries thus far and their possible consequences.

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Water pollution in China - 1/4 gone, 3/4 left (for now)

In China's thirst for growth it is in danger of having the breaks applied very sharply from environmental contraints none more important that a lack of clean water.

China might, just might, be getting on top of air pollution but water pollution remains a serious problem. The sheer scale effect of China's growth will mean the battle against PM10 and air pollution is far from over.

Pollution Makes Quarter Of China Water Unusable: Ministry [PlanetArk]

Almost a quarter of China's surface water remains so polluted that it is unfit even for industrial use, while less than half of total supplies are drinkable, data from the environment watchdog showed on Monday.

Inspectors from China's Ministry of Environmental Protection tested water samples from the country's major rivers and lakes in the first half of the year and declared just 49.3 percent to be safe for drinking, up from 48 percent last year, the ministry said in a notice posted on its website (www.mep.gov.cn).

China classifies its water supplies using six grades, with the first three grades considered safe for drinking and bathing.

Another 26.4 percent was said to be categories IV and V -- fit only for use in industry and agriculture -- leaving a total of 24.3 percent in category VI and unfit for any purpose.

Despite tougher regulations over the last decade, the ministry has struggled to rein in the thousands of small paper mills, cement factories and chemical plants discharging industrial waste directly into the country's waterways, and the overuse of fertilizers has also left large sections of China's lakes and rivers choking with algae.

The ministry said there were noticeable improvements in air quality throughout the country's cities in the first half of 2010, with sulphur dioxide emissions declining 30.2 percent compared to last year.

Airborne particulate matter in China's cities fell 12.1 percent and nitrogen dioxide declined 5 percent, the ministry said.

However, 189 out of 443 cities monitored suffered from acid rain in the first half of the year.

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Climate and war in China

As an academic with an interest in the fascinating history of China the following article on the impact of climate change on war and civil unrest is very interesting.

There is no doubt that droughts will cause future unrest. The government will need to be prepared.

Cooling Caused Wars And Drought In China [PlanetArk]

As Chinese policymakers grapple with an expected increase in extreme weather due to global warming, a study has found that periods of cooling between AD 10 to 1900 also caused a wave of disasters, war and upheaval.

Droughts and locust plagues caused by cooler spells probably triggered internal wars, the authors said.

In a modern day parallel, China, the world's top emitter of greenhouse gases blamed for heating up the planet, has taken steps to curb emissions growth fearing growing social unrest from environmental degradation.

Zhibin Zhang of the Chinese Academy of Sciences and his team used historical records and paleoclimatic reconstructions covering nearly 2,000 years.

They found that the frequency of wars, droughts and floods, price of rice, locust plagues and temperatures in China were positively associated within time bands of around 160 and 320 years.

The study was published in the latest issue of the journal Proceedings of the Royal Society.

"Our study suggests that the food production during the last two millennia has been more unstable during cooler periods," the authors said.

This resulted in more social conflict owing to rebellions within dynasties and/or aggression from northern pastoral nomadic societies in ancient China, they said.

The collapses of the agricultural dynasties of the Han (206 BC-AD 220), Tang (681-906), Song (960-1279) and Ming (1368-1643) were more closely associated with low temperature, they said.

DRIVING FORCE

"It is very probable that cool temperature may be the driving force in causing high frequencies of meteorological, agricultural disasters and then man-made disasters (wars) in ancient China," they said.

In particular, the results suggested that periodic low temperatures could have increased the frequency of internal wars mainly indirectly through increasing drought and locust plague frequencies between AD 950 and the 1900s.

They said external aggression wars mostly occurred between Chinese dynasties and the pastoral nomadic societies to their north, such as the Manchus who overthrew the Ming dynasty.

A cooling of a few degrees Celsius can shorten the northern growing season of grass by 40 days, adversely affecting grasslands and causing huge losses of domestic livestock. This pushed northern tribes south.

The authors found two predominant periodic bands of around 160 and 320 years during past two millennia.

"These periods may be related to cyclic variations of solar activity, or cyclic changes of orbit position of the Earth," they said, pointing to 87 and 210-year cycles of solar activity based on observations of sunspots.

"It is generally believed that global warming is a threat to human societies in many ways. However, some countries or regions might also benefit from increasing temperatures in some ways," the authors said.

The global climate has natural variations in temperature and rainfall but scientists fear the rapid accumulation of greenhouse gases since the Industrial Revolution could lead to catastrophic climate change unless emissions are sharply reduced.

"However, the present on-going global warming may produce different effect on our industrialized societies which own much higher capacity of dealing with natural disasters than pre-industrial societies," they say in a pointer to China's rapid rise to become the world's number 3 economy.

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Chinese firms are getting larger - a threat to the West?

The recession in the West has thrown up a number of opportunities for rapidly growing Chinese and emerging country firms. Whether it is organic expansion or by taking over ailing assets in developed countries.

The FT do a good piece on this.

Business: A change in gear [FT]

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Ubanisation in China

China's rapid growth is putting pressure on the ever growing cities. Shanghai's Expo is providing some of the answers. Today's FT gives a nice little summary of the problems that China faces.

THE BURDEN OF URBANISATION [FT]

China has the world’s biggest urbanisation problem and Expo is promising the world’s best solutions.

By 2030, China will have an urban population of 1bn, having added 350m by then – more than the entire current population of the US, according to a recent McKinsey study, Preparing for China’s urban billion. Even five years before that, China is forecast to have 219 cities of more than 1m each, compared with 35 in Europe today, and 24 cities of more than 5m.

Shanghai, with nearly 20m already, is a living experiment in urbanisation – and one that is mostly failing. The polluted Huangpu river runs between banks crowded with concrete apartment complexes with little or no greenery (but lots of hanging laundry). Parks are few and playgrounds almost unheard of; pedestrianisation is limited and walking is deemed one of the city’s most dangerous sports.

For years, Shanghai has smothered its history in skyscrapers, and Expo has accelerated that process. At the Expo site itself, the Shanghai government did convert one steel plant into a theatre; but outside Expo, numerous traditional buildings have been knocked down.

Wujiang Lu, the city’s famous snack street where stalls served everything from octopus to offal on a stick, is gone. There was nowhere to sit and the rubbish bins were too infrequently emptied – but rather than install benches and schedule extra visits from the trash collectors, the city opted for demolition. Starbucks and Krispy Kreme are there but Little Yang’s famous crispy-bottomed soup dumpling stand is no more.

Part of the point of Expo, whose motto is “Better city, better life”, is to make sure Shanghai thinks twice before demolishing the next Wujiang Lu. “Shanghai could leapfrog the rest of the world [on urbanisation], because the scale of what they want to do and what they need to do is so enormous,” says Anthony Elvey, director of Cisco’s Expo pavilion.

Hoping to sell its integrated city management systems to China’s mayors, the Cisco pavilion is a celebration of the joys of a microchip-enhanced life: right down to wristwatch-sized monitors that simultaneously check the contractions of a pregnant woman, summon the ambulance, inform her husband, rouse the obstetrician from bed and book a delivery room.

Indeed, connected urban living is a main focus of the corporate Expo pavilions: schoolchildren use global positioning devices to find the best bus route home, where they are greeted by a grandmother who has just teleported in from the provinces; cars talk to the traffic grid to find out where best to park themselves.

Some Expos are memorable for inventions that endure; others are mere graveyards for technologies that came before their time. It could take decades before it is known which category Shanghai falls into: a moment that changed urban life forever, or just an urban fantasy.

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US chicken farmers spitting feathers

China has picked on the humble chicken for the next salvo in the escalating trade war between China and the US.

Given the number of chickens in China it is perhaps surprising that China imports chicken at all given the transport costs and perishability of the said white meat.

Still, a 31.4% tariff is not to be sniffed at. Even without a tariff it is hard to believe that US chicken is competitively priced to actually have a market in China. However big that market is it is about to get smaller.

US chicken farmers will be spitting feathers (cheap gag) and US subsidies might have to get larger.

China to impose new tariffs on US {FT]

China announced yesterday it would impose a second round of tariffs on imports of US chicken products of as much as 31.4 per cent.

The commerce ministry said the tariffs were a response to what it called unfair subsidies given to US poultry farmers. The duties come on top of charges of up to 105.4 per cent placed on poultry two months ago because of alleged dumping .

Economic friction between the two countries had appeared to be relaxing after the US Treasury delayed its decision over whether to label China a currency manipulator.

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